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Increasing access to justice while ensuring public protection is part of the balance a new California Bar task force will have to strike while examining the delivery of legal services through the use of technology.
The question for the task force, which is now accepting applications, is how the legal services industry can integrate new technology to become more efficient and responsive, while avoiding ethical roadblocks against fee-sharing with nonlawyers and other arrangements.
Ethics rules are laudable “because they’re trying to prevent harm from taking place” and at the same time have a “stifling effect” for innovation, William Henderson, Indiana University law professor, told the bar’s Board of Trustees.
Modifying the ethics rules to facilitate greater collaboration across law and other disciplines will drive down costs, Henderson said in a report the bar commissioned. The report reviewed the legal services market landscape and new business models, including full-service and limited-service models by non-legal professionals such as accountants.
The ethics rule against fee-sharing with nonlawyers and nonlawyer ownership of law firms, Rule 5.4, is a main impediment to innovation because it prevents lawyers from partnering with “technologists, process design experts, [and] data scientists,” Henderson said.
Changing the rules will improve access; increase legal services’ predictability and transparency; aid new business growth; and elevate the profession’s reputation, the report said. “Some U.S. jurisdiction needs to go first. Based on historical precedent, the most likely jurisdiction is California,” Henderson concluded.
“Rather than amend an ethics framework built for a bygone era, the public interest may be better served by a new regulatory structure that includes traditional lawyering side by side with one-to-many legal services, products and solutions created by a wide range of professionals from multiple disciplines,” Henderson’s report said.
Such “Alternative Business Structure” law firms have taken root in the United Kingdom and Australia in recent years, Henderson said.
California and Silicon Valley tech companies have the resources to make help innovate the legal sector, said Raj Abhyanker, CEO of LegalForce Inc., which operates under the name Trademarkia.
California “greatly limits [legal service companies'] growth, greatly limits their innovation, and makes it difficult for people who are not traditionally attorneys,” Abhyanker told Bloomberg Law July 30. “Engineers and entrepreneurs and the greatest minds of California can’t play a part” in improving access to justice.
LegalForce is actively suing LegalZoom Inc. and UpCounsel.com over business practices that LegalForce says unfairly circumvent legal ethics rules and laws regulating lawyers. The most recent lawsuit, filed July 27, is against 50 California lawyers who advertise trademark-related services on UpCounsel and share fees with the lawyer referral service.
The bar’s next steps could be outlined by the end of the year. Trustees approved the task force to begin its work in September and report back to the board by Dec. 31.
“We as an institution need to pay the bills and fulfill our social mission. And technology is means by which we can do that,” board Chairman Michael Colantuonov said during the Board of Trustees meeting July 20.
“The number of lawyers who need to pay us x-hundred dollars a year is not going to grow any further. But we still have a 40-million population to serve, and how do we serve them? We might serve them by licensing internet-based legal service providers who will want to go into various marketplaces and say somebody is assuring the quality of our services,” much like Underwriters’ Laboratories certifies appliances, Colantuono said.
The change comes as the bar, under direction from the Legislature and California Supreme Court, has overhauled its operations.
Last year’s expansive changes in the annual dues bill ( S.B. 36) split the bar’s discipline and regulatory functions from the sections that can provide continuing education and lobby lawmakers.
California’s 250,000 licensed attorneys have dual masters – they’re licensed and disciplined by the California Supreme Court and are bound by legislation, primarily the state’s Business & Professions Code.
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